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Exploratory works for the Thames Tunnel outside the palace of Westminster.
China's sovereign wealth fund takes a dip in Thames Water
Posted: 20th January 2012
After lots of encouragement from the chancellor George Osborne, China’s sovereign wealth fund has finally invested in the UK economy with the purchase of an 8.68 per cent stake in Thames Water.
The Chinese Investment Corporation (CIC), which is worth $410bn, took the decision after talks with Mr Osborne in Beijing this week and months of overtures from the coalition government to the Chinese to invest in infrastructure and utilities projects.
Following the announcement, Mr Osborne sounded understandably pleased with the arrangement, saying: "It is a vote of confidence in Britain as a place to invest and do business. This investment is good news for both the British and Chinese economies."
Lou Jiwei, the chairman of the CIC, had previously signalled his desire to invest in Britain and other Western countries last year.
Although it would not reveal how much it had paid, the company issued a statement confirming that it had taken the stake in the holding company that owns Thames Water and that the deal had been done through a wholly-owned subsidiary.
Mr Lou told the Financial Times last November that he saw a “win-win” situation where Chinese funds would help to update the west’s infrastructure and that such schemes offered solid returns.
He praised Britain as “one of the most open economies in the world” with a “sound legal system”. Mr Lou suggested Chinese companies and investors wanted to own and operate infrastructure in the west as well as help build it.
The deal provides the CIC with the chance to cash in on the stable, long-term returns offered by British water companies, and comes on the heels of Hong Kong tycoon Li Ka-shing's move to buy British utility Northumbrian Water last year for just under $4bn.
And CIC’s plunge into Thames Water follows the Abu Dhabi Investment Authority’s 9.9 per cent investment in Kemble Water Holdings, the holding company that controls the utility.
Kemble acquired Thames Water, which supplies water and sewerage services to London and some surrounding areas, from German utility RWE in 2006 for £8bn.
Thames Water is the largest of the 10 water and sewerage companies in England and Wales, and the latest investment comes halfway through the second year of a five-year funding settlement for water companies in England and Wales with the industry watchdog Ofwat.